Why A Happy Holiday Is Ahead For Retailers

Amazon has just redefined Black Friday. This week, the e-commerce giant kicked off its Black Friday promotions, which will introduce new deals as frequently as every five minutes through Dec. 22. This news exemplifies what is to come this holiday season, as consumers choose to shop earlier, continue to shift their holiday shopping online and face positive macroeconomic conditions. At Fung Global Retail & Technology, we expect retail spending for the U.S. holiday season to increase by 3-4%, versus last year’s 3.2% and the 2.5% average over the last decade. Below we outline key factors to holiday spending.

Holiday Expectations More Positive Than Last Year

Some research retail firms have already released expectations for the upcoming holiday season; many projections are more optimistic than last year’s numbers. Retail sales in November and December are expected to increase by 3.6%, reaching $655.8 billion this year, up from $626.1 billion in 2015, according to the National Retail Federation. Additionally, 32% of consumers plan to start their holiday shopping earlier than last year.

The NRF forecasts that there will be a need for 640,000-690,000 additional holiday workers. This figure is constant with the 675,300 workers hired in 2015, meaning that retailers are not expecting dramatic changes in brick-and-mortar sales this year.

Interestingly enough, outplacement firm Challenger, Gray & Christmas highlights the increased need for seasonal workers at transportation, warehousing and entertainment facilities. Target is hiring 7,500 facilities workers, while JCPenney plans to hire 2,000 workers to fulfill online orders. Amazon is also hiring 120,000 seasonal workers in customer fulfillment and customer service, a 20% increase from last year. This indicates that retailers are expecting the main driver of growth to come from e-commerce this holiday season.

E-Commerce To Drive Sales

Online sales rose by 15.8% and accounted for 8.1% of total retail sales during the second quarter, according to the U.S. Census Bureau. This means that e-commerce will play a large role in retail sales this year.

Several U.S. macroeconomic changes will impact holiday retail shopping this season, including the lower unemployment rate, decreased gas prices and a positive housing market. These segments have improved from last year’s data, and will in turn create a stronger holiday shopping season this year.

Tech gifts have become very popular amongst consumers. According to the CTA, 68% of consumers will buy electronics this holiday season, a 3.1% increase from last year. Headphones will be a hot giftable, driven by the rise of audio devices and the release of the Bluetooth only iPhone 7. Laptops, TVs, smartphones, tablets and video-game consoles will also be popular gift purchases in the U.S.

The most sought-after toys this holiday season are expected to be those that stimulate children’s minds, such as Fisher-Price’s Think & Learn Code-a-pillar. Additionally, Cozmo, a small artificial intelligence robot, will also be a popular choice this season. Cozmo is capable of forming a unique personality as it spends more time with its user. Below, we highlight what are projected to be the hottest-selling toys this season.

Hot toys for holiday 2016. Source: Walmart, Pokémon, Amazon.

Two Extra Shopping Days This Year

This year there are two extra days between Thanksgiving and Christmas, which means two extra days for retailers to amp up sales. As always, Thanksgiving falls on a Thursday (Nov. 24 this year). Black Friday is the day after (Nov. 25) and Cyber Monday falls on the following Monday (Nov. 28). Other lesser known holidays include Singles Day (Nov. 11), the celebration of being single; Giving Tuesday (Nov. 29), a day designed to encourage charitable giving; and Green Monday (Dec. 12), the second Monday in December.

Super Saturday, the Saturday before Christmas, is a day for retailers to generate as many sales as possible before the end of the holiday shopping season. Since Christmas is on a Sunday this year, Super Saturday falls on the day before Christmas which is also the first day of Hanukkah this year. As a result, retailers are expecting even more consumers to make last-minute purchases in-store rather than online.

Colder Holiday Temperature Forecast: Good For Retail

Planalytics, a weather forecasting firm, expects the eastern half of the US to have cooler temperatures in November and December, drier conditions through the Plains and Southeast and wetter conditions in the Northwest, which may benefit in-store traffic in these regions. Last year, the U.S. saw record warm temperature, which forced many retailers to offer discounted products in order to get rid of inventory.

Overall, we see several positive indicators heading into the holiday season. In addition to the continuation of e-commerce being a large part of sales, the positive macroeconomy will provide a gateway for favorable performance this year. Colder temperatures will help boost sales of seasonal items and two extra shopping days will give retailers extra opportunities for sales. Overall, we are optimistic about the holiday shopping season, expecting 3-4% growth versus last year’s 3.2%.

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I am an award-winning global retail analyst and a specialist in retail innovation and technology. I am the CEO and founder of Coresight Research, a think tank and mentorship network that advises clients on disruptive technologies reshaping today’s global retail landscape. I...